The real estate market will only recover when loan interest rates decline, a seminar heard in HCM City on February 25.

Speaking at an event hosted by Vietstock Communications, Dr Le Xuan Nghia, vice chairman of the National Financial Supervision Committee, said though the Government's efforts to curb inflation have yielded results, banks' interest rates have not dropped significantly.

Prof Dr Dang Hung Vo, a former deputy minister of natural resources and environment, said the real estate market will continue to face a shortage of capital this year.

The sector should not have high expectations of foreign investment since foreign investors will only invest when they see property prices drop sharply, he warned.

Both Nghia and Vo agreed however that there is unlikely to be a situation where property developers sell on the cheap.

Vo explained away the steep price cuts made by some developers as being due to the poor location of their projects.

The tight monetary policy and oversupply in some segments have forced property investors to cut prices, but this is not a widespread occurrence, Nghia said.

Many people are still holding out for high prices, so foreign investors consider Vietnamese property prices high, he said.

Speaking about possible development opportunities this year, Vo said the market can improve in the third quarter when banks' liquidity problems are expected to partially ease and credit will again begin to flow into it.

The Government has given priority to restructuring the monetary and banking sectors, and already approved the national housing development strategy from now through 2020, he said, referring to the need for more housing to be developed under the strategy.

Nghia predicted the low-priced housing segment to recover first, by mid-2012 at the earliest./.